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A State System of 
Retirement Funds for Teachers 

From the Viewpoint of a 
Business Man and a School Director 



ADDRESS 

DELIVERED BY 



MARCUS AARON 

MEMBER BOARD OF PUBLIC EDUCATION, PITTSBURGH 
AND PENNA. STATE BOARD OP EDUCATION 



BEFORE THE 

STATE EDUCATIONAL ASSOCIATION 
HARRISBURG 



December 29, 1916 



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D. Of .D- 
JUL 16 '9" 



A State System of Retirement Funds for 

Teachers 

From the Viewpoint of a Business Man and a School Director 



Address delivered by Marcus Aaron before the 
State Educational Association, Harrisburg, December 29, 1916 



The past history of teachers' pensions in this country has 
been anything but satisfactory or complimentary to the business 
sense of those who founded the various sj^stems. They have been 
a perpetual record of illusions, a continuous series of bankrupt- 
cies. Looking backward there would seem to be no possible ex- 
cuse for teachers and business men continually fooling themselves 
unless it be that practically everyone has done the same thing in 
some form of insurance rainbow chase. 

The concrete results of these bankruptcies, when the inevit- 
able end came, have been pathetic in the extreme. In instance 
after instance those who paid for years have awakened too late to 
the discovery that, when their own need came, "The cupboard 
was bare." 

The only hopeful sign has been a general recognition of the 
gravity of the situation, together with several attempts to make a 
scientific study of the problem and find a remedy. 

Perhaps the foremost of these, and the one which is entitled 
to receive the most serious consideration is that made by the 
Carnegie Foundation. 

In his Tenth Annual Report, the president, Dr. Henry B. 
Pritchett, says : 

"The function of a pension system is to secure to the indi- 
vidual who participates in it, protection against the risk of de- 
pendence due to old age or to disability." 

"Society rightly assumes that so long as the bodily and men- 
tal powers of the individual are not impaired he shall be a self- 
sustaining economic unit in the body politic. ' ' 

"Too much is at stake to indulge in experiments." 

"Seldom is there any evidence of expert assistance." 

"Too many of the plans adopted appear to be inspired by a 
desire to launch a system somehow, relying on a secret and inde- 
finable hope that Providence or the public treasury or the wealthy 
philanthropist will not permit the poor pensioner to suffer." 

"This feeling is well expressed by the retired teachers of 
New York City, in a recent meeting to protest against the pro- 
posed reduction in their allowance in the sentence — 'I don't be- 
lieve we will have any difficulty in getting our money, for the 
City of New York is too great to allow its retired teachers to 
suffer.' " 



"Many of the recent schemes approximate too nearly to a 
kind of reversed tontine policy — those who come in early get 
what there is : the ultimate survivors stand to lose everything, the 
pension and their own contributions." 

"It has been impossible to discover in any of the campaign 
literature on behalf of pension legislation any estimate of the 
probable cost of a pension system." 

"Educational leaders are still content to make what may at 
least be characterized as unfounded and conjectural assertions." 

This entire report is worthy of the most careful study of all 
those who desire an authoritative summary of the teachers' pen- 
sion situation at present. 

Those whose pension systems are either on the verge of bank- 
ruptcy or are destined to insolvency, and particularly those who 
are giving careful study to the subject, recognize that the follow- 
ing are the fundamental requirements of a good pension system : 

1. It shall, above all, be financially sound. 

2. It shall be as generous as possible to the teacher. 

3. It shall be fair alike to the two parties at interest, who 
are usually contributors, — the taxpayer on the one hand and the 
teacher on the other. 

Several questions present themselves. What do we want to 
do ? What can we do ? What is the right thing to do ? How shall 
we do it? 

One of the first things that has to be determined is the stand- 
ing of the teacher as a public servant. Has the teacher, because of 
the peculiar nature or quality of her service, an exclusive right 
to a pension? 

However exalted an opinion teachers as a class may have of 
their contribution to the public weal, they will scarcely insist 
that they have an exclusive right to a pension at public expense. 

If teachers do not have an exclusive right to a pension, 
what is their relative standing among other public servants? 

Are all public servants entitled to pension? Are other mem- 
bers of the democracy, not public servants, entitled to pensions 
at the expense of the public? 

Even if a teacher may believe that she has an exclusive right 
to a pension, or a right to a preferred claim among other public 
servants, it is not probable that the remainder of the public will 
be readily persuaded to admit the claim and to provide the funds. 

On the other hand, there is a growing feeling that there is an 
obligation upon society as a whole to safeguard the individual 
from preventable distress, coming from any direction. It will 
probably be recognized in the near future that it is not only just 
but economical to provide in some way old age pensions for those 
who are in financial distress and without relatives or others upon 
whom they may fairly depend for support, 

It will, however, doubtless be some time in the future before 
there is adequate public provision for such cases. And in the 



meantime, we are confronted by the condition of the teacher and 
not by an abstract theory. 

The world is in the midst of a change from an individualistic 
to a co-operative theory of life. One of the most difficult prob- 
lems, and one which any pension system most vitally affects is 
the problem of securing the benefits of co-operation and at the 
same time safeguarding individual integrity. Everyone who has 
given any study to the practical operation has been grieved at the 
evidences that any form of pension tends to undermine that ster- 
ling self-reliance which has always been one of the most highly 
esteemed of the virtues. 

What is the relation between the public and the teacher? 
How much absolute truth is there in the idea that a teacher has 
a just claim for special consideration at the hands of the public? 

It will perhaps not be denied that the teacher who has served 
faithfully many years is one of the most valuable, if not indeed 
the most valuable of public servants ; that she is in many in- 
stances the best beloved servant ; that the public generally stands 
ready and willing, to properly recognize, appreciate and reward 
past service ; that for selfish reasons, if for no other, the public is 
willing to take such steps as may be necessary to secure for itself 
a continuance of such service for the future ; that at least in this 
department of the relation between employer and employee the 
question of the human relation is vital ; that it will be worth a 
serious effort to attempt to secure happy and contented service, 
if such a thing is humanly possible ; that since the teacher deals 
with our children and our children's children, it would be well 
worth while to concern ourselves deepty with her work and her 
happiness in it. 

Teachers may be roughly grouped into two classes: (1) those 
who are teaching temporarily, before entering a home of their 
own or another career, (2) those who devote themselves to the 
profession as a life work. 

It would be perfectly easy to say that the first group could 
make no serious claim to a pension and that only the second group 
need be considered. The difficulty is that but few teachers delib- 
erately set out to join the second class, and that the transition 
from the first group to the second is gradual, and often involun- 
tary. 

The teacher who really belongs in the second group, how- 
ever, is usually the salt of the earth. She has deep in her heart 
that essence of the spirit of good Avomen everywhere — the spirit 
of self-sacrifice. She is earning daily the title, "Other Mother," 
for she is, almost universally, giving not only her earnings, but 
the essence of her life, not in response to mere instinct for her 
own children but an altruistic effort for the highest good of the 
children of others. A great teacher always bequeaths to those 
chosen children of the mind and soul, dearer often because there 
are no real children of the body, something of the quality of an 
Alma Mater — a real bountiful Mother. 



The pathos of the situation, however, consists in this, that 
when the tragic years have come and her youth is gone, there 
are no children of her very own, to cherish and sustain her. Her 
parents have long since died, her brothers and sisters have scat- 
tered or have obligations of their own. She stands facing the 
future with no home, little or no money, and little or no chance 
of living even for a few restful years, her own life, though it be 
but a life as simple — and as lonely — as that of a cloistered nun. 

It is because every community recognizes the pathos and the 
tragedy of this situation, that there exists a common feeling and 
determination everj^where that no teacher who has served faith- 
fully for many years shall be permitted to come to financial grief 
or end her daj-s as an object of charity. 

On the other hand we should not forget that there are two 
obligations resting upon all members of society whether teachers 
or not: (a) the obligation to keep well and in condition to do 
one's work; (b) the obligation to save something for a rainy day. 

Since a teacher cannot as in industrial and municipal ac- 
tivities be transferred in later years to less difficult duties, the 
only solution at once practical and humane is to admit the claim 
to some special pension consideration. 

And precisely because of this general feeling, and in antici- 
pation of a more general provision for such cases there have been 
established, from time to time, such funds as the El kin Fund of 
Philadelphia and the Frick and Carnegie Funds. 

An effort is now being made to standardize this movement 
and to make it universally applicable. It is recognized that no 
young teacher could be expected to enter the profession if the 
road led only to the poorhouse. 

There are three great motives to which an employer may ap- 
peal : (1) Wages, or financial reward. (2) Appreciation. (3) A 
missionary spirit, or a high sense of right. The financial appeal 
is the most general. It is exemplified by the practice of the up- 
to-date industrial organization. But it is extremely improbable 
whether the financial rewards of teaching will ever be sufficient 
to attract men and women from other callings. Nor is there much 
probability that there will soon or ever be developed a keen 
enough appreciation on the part of the public to make teaching 
attractive. We must place our main dependence upon the mis- 
sionary spirit and upon the sense of right. 

There are men and women everywhere who would gladly ded- 
icate their lives to the cause of childhood if they might be assured 
of but one thing, — that they will not be obliged to end their days 
as an object of charity. One of the most deeply pathetic things 
in this world is a teacher and a gentlewoman, forced to spend 
her last years in want. 

What inducement will we offer this public servant in advance 
as a return for a life work? What is the minimum obligation 
resting upon society in this instance? 



The great unsolved problem in a democracy is how to enlist 
for the service of the whole people the best brains and ability 
within that people. The public school is, as a whole, the most suc- 
cessful of the institutions of a democracy. It is pre-eminently the 
institution to which is entrusted the very life of the democracy. 
There is no panacea in the phrase, "The majority shall rule." 
There is absolutely no guarantee that the majority will be or 
remain fit to rule. The panacea consists, if there be one, in mak- 
ing and keeping the majority FIT to rule. And it is this train- 
ing for fitness to rule which is the peculiar province of school 
and teacher. 

In view of all of these considerations it may be agreed that 
after a stated number of years of service, a teacher has a right to 
receive enough each year to enable her to live simply for the re- 
mainder of her life. What the period of service should be, and 
what the amount of the annual pension should be have not yet 
been determined. 

This much, however, is certain — that it is worse than useless 
for teacher, school board or public to cherish the delusion that 
funds can be paid without being provided; that twice two will 
make seven for a teacher in a pension fund any quicker than it 
will elsewhere. All must face the facts that the mortality tables 
will prevail here as elsewhere ; that, in order to grant an annuity 
of $500 per annum to a teacher aged 65, there must be on hand 
approximately $5,000 at that time, procured from some source, 
either the teacher, the public or elsewhere; that this amount 
would be entirely inadequate to provide the same annuity at age 
of 60; that the details of any plan are questions for the most 
careful study by actuaries of wide experience; that a surplus is 
easier to handle than a deficit ; that a pension plan must be sound 
before it is sympathetic ; that a proper plan once found for a city 
may be extended to a state and to the nation. 

The Pittsburgh Board of Public Education after an exhaus- 
tive study, made under the direction of Mr. S. H. Wolfe and a 
group of experts, have now under consideration a pension plan 
the cost of which has been determined and the solvency of which 
is unquestioned. 

The plan assumes that there is a responsibility upon everyone 
to save something from his or her salary; that in the case of a 
teacher the public may be fairly expected to supplement these 
savings ; that those drawing larger salaries should effect larger 
savings, and that there is no obligation therefore to provide for 
any one group of teachers larger pensions than for another group, 
or a sum larger than will guarantee the necessities of a simple 
life. 

The plan embodies the following features : 

A — Contributions By Teachers. 

1. That all contributions made by the teacher shall in every 
event be returned to her or her designated beneficiaries with 
interest compounded at 4%. The teacher has therefore a guar- 



anteed savings account in addition to provisions for a pension. 
This provision was made in justice to the teacher who withdrew 
for any reason before becoming an annuitant or before receiving 
back her payments as an annuitant. In effect, therefore, no 
teacher contributes to any other teacher's pension. She con- 
tributes toward her own pension and that only if she becomes an 
annuitant. 

2. That contributions are to remain uniform, viz : a teacher 
aged 30 will continue to pay the rate for that age as long as she 
contributes. Rates vary from $16.50, at age twenty, to $52 per 
year, at age forty, and all succeeding years. The nearest com- 
parable service available commercially would cost a teacher aged 
twenty $40 per year, a teacher aged forty $152 per year, and a 
teacher aged fifty $337 per .year. 

3. That all teachers shall participate. 

B — Contributions By Board. 

1. That the Board shall contribute, dollar for dollar, with 
the teacher. 

2. That in addition to the above the Board shall pay the ex- 
cess rate for teachers now in service over the age of forty. 

3. That the Board shall pay the cost of administration. 

4. Contributions made to the retirement fund by the Board 
shall remain in the fund to be used solely for the benefit of the 
teacher. 

C — Benefits. 

1. That earnings at the rate of 4% have been assumed and 
standard tables of mortality used in the calculation. 

2. That a pension of $500 be paid annually during the life 
of each teacher retiring at the age of 65, or of $300 to each teacher 
retiring at age 60. 

3. Disability pension varying as to age and service have 
been provided. 

There has been considerable feeling on the part of the teacher 
that the maximum allowance for retirement should be effective at 
not over age 60. While such a change might be desirable from the 
standpoint of school administration, it is financially impossible 
for the school district and the teacher without substantial con- 
tribution to the fund by the State. 

The scale of benefits in comparison with other retirement 
fund plans may seem low, but it must be remembered that many 
of the more ''generous" plans, while apparently on a sound basis, 
are actually insolvent when their accrued liabilities are properly 
computed. A better scale of benefits, of course, could readily be 
devised, but this would require higher contributions on the part 
of either the teacher, the school district, or the State. Those 
who want more must face the question, who is to pay the bill ? 



However desirable a State retirement fund for teachers and 
however anxious many of us may be for early action, the Legisla- 
ture should hesitate before enacting into law any pension legisla- 
tion that has not been carefully studied, both as to its effect and 
its cost, immediate and ultimate, by those competent to under- 
stand the niairy intricacies involved, even though the bill pro- 
posed has the endorsement of every teacher in the State. There 
is another party in interest. Though the teacher is willing to 
trust the generosity of the next generation, if the plan survive 
so long, we are criminally negligent, if, in spite of warnings that 
signal unmistakable disaster, we do not take every precaution to 
build safely and well. The teacher is blind if she does not see 
that her interests suffer through unsound finance, and the people 
have a right to demand that however meritorious the project, no 
promise to pay shall be made in the name of the State or in that 
of the school district, the cost of which has not been counted, 
for which adequate provision has not been made. 

The law in most States compels insurance companies to pro- 
vide a reserve actuarily determined to protect promises to pay. 
There is no such provision safeguarding State, municipal or com- 
mercial pension funds, the proper reserve has not been provided 
and hence those funds not already acknowledged to be bankrupt 
are steadily and surely heading in that direction. 

No pension fund is sound that does not set aside from year 
to year the reserve necessary with its accumulated interest to 
provide the pension, at the date agreed upon. Better no promise 
than a broken one and better no hope for an annuity than disap- 
pointment to an annuitant or a prospective annuitant resultant 
from mistaken finance. Once upon a time we did not know better. 
Today we are without excuse if we have not learned our lesson. 
The State that neglects the proper supervision of its life insurance 
companies is inviting sure scandal and disaster. Scarcely less 
important, if the pension idea is to develop, is the necessity for 
careful actuarial calculation and for careful governmental super- 
vision of plan investment. 



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